Congressman Zach Wamp of the 3rd District of Tennessee recently sent out a letter to his constituents about his dissatisfaction with the lack of oversight in the recent Trouble Asset Relief Program (TARP) known more commonly to many as the “$700 billion bailout.” The letter follows:
Americans are overwhelmingly opposed to any more bailouts of private institutions, including the automakers. Secretary Paulson, Chairman Bernanke and the rest of the Bush administration have been slow and ineffective at implementing their financial rescue plan signed into law October 3. While members of both parties made it clear that approval of the plan was contingent on congressional oversight, there has not been a free flow of information between the administration and Congress.
The continued instability of our financial markets has left many Americans questioning the decisions made by Treasury and doubting that this plan will ultimately succeed. To earn back the trust of Americans, our government must stop spending money we do not have, implement needed reforms and let competition determine success or failure in the market place.
Member of Congress
The proposal of the massive bailout package for large corporations back in late September caused massive unrest for most Americans. Many wrote their representatives in such mass numbers that the congressional e-mail system suffered congestion and downtime. I’m assuming the above is a general response to many of Wamp’s constituents who commented on the bill.
It is important to note that although Wamp voted no on the first economic package1, he did vote yes to the second one2. Furthermore, all these packages have done is allow large banks to consume small ones, removing competition. Through the use of TARP funds and tax breaks, large banks can do this at no cost, sometimes even turning a multimillion dollar profit, while small banks are allowed to fail with no possibility of a bailout; effectively letting the Treasury and the Federal Reserve chose which banks live and which ones die3.
National City Bank is the 11th largest bank in the country4. This 168 year old Cleveland bank, the largest bank in Ohio, was denied an application for TARP funds, although it is unclear exactly which agency denied their application5. They may now have to be consumed by PNC which expects to purchase them for $5 billion.
The treasury has rewritten tax law, without knowledge of Congress, so that PNC would get a $5 billion tax credit for the purchase, essentially allowed them to buy National City for free. In similar fashion earlier this year, Wells Fargo acquired Wachovia for $15 billion, but will receive $20 billion in tax credits causing the merger to result in a $5 billion profit for Wells Fargo3.
1 Project Vote Smart – Representative Wamp on HR 3997 – First Economic Package
2 Project Vote Smart – Representative Wamp on HR 1424 – Second Economic Package
3 Bank Eat Bank: Bailout Encourages Mergers Ivory. American News Project. November 21, 2008.
4 Nations Largest Banks Retrieved on December 4, 2008.
5 GAO report suggests regulators played biggest role in National City’s demise Koff and Murray. Cleveland.com. December 2, 2008.